Each state has its own set of policies enacted to protect purchasers of consumer goods, whether for personal or household use, from “nonconformities” (i.e., product defects, akin to the proverbial lemon law). There is a version of the “lemon method”. However, exactly what products qualify as “lemons” varies by state. For example, some of Lemon's Laws apply to: Any Includes motor vehicles (new, used, leased), but excludes used or leased vehicles in other states. Lemon laws in some states exclude motorcycles, campers, appliances, and household appliances, while in other states, such as California, lemon laws apply to nearly all consumer products.
If a consumer notices a defect in a consumer product, they must first notify the manufacturer or authorized retailer and provide at least one repair (most states require two to four repairs) . Then, if a product has not been satisfactorily repaired, or in some cases even if it has been repaired, it has not been used for more than a minimum number of days (usually more than 30 days), then it is considered a . Consumers can request full repurchase or file a lawsuit.
California Song Beverly Law
California's lemon law applies to nearly every product, but the Song-Beverly Warranty Law is arguably the most consumer-friendly lemon law in the country. As a result, the number of lemon law claims filed against California manufacturers has skyrocketed in recent years from 17,000 to more than 22,000, and is on track to exceed 30,000 by 2024. It is progressing.
In California, consumers can recover if a product qualifies as a “lemon” but also The full purchase price is Also This includes attorney fees, litigation costs/expenses, and (in some cases) civil penalties. While the conditions that qualify as a lemon in California (low number of repair attempts, low number of outages, etc.) are very consumer friendly, most states allow similar remedies and manufacturers may You need to pay close attention.
Early assessment of repurchase demand
When consumers demand that manufacturers repurchase products, the impact can increase exponentially. Therefore, it is important for manufacturers to obtain and evaluate documentation by retaining in-house or outside counsel. earlysuch a request.
For example, imagine the following scenario. Your company manufactured a $40,000 car and sold it in California. The consumer takes the car to the dealer for repair, but ends up with multiple repair attempts, resulting in the car being unusable for more than 30 days. The consumer then requests a repurchase. The manufacturer may refuse to repurchase or simply do not have enough information to repurchase. The consumer filed a lawsuit, traded in the car for $19,000, and purchased another vehicle while the lawsuit was pending. The result of this lawsuit was a verdict that included not only a repurchase price of $40,000, but also a civil penalty of $60,000 (1.5 times the value of the vehicle in this case), as well as attorney's fees and court costs/expenses. It could become even more expensive. More than the car's value. And since the vehicle has already been traded in, the manufacturer will not return the vehicle as salvage or receive it as an offset against the $19,000 trade-in value.
Is this a windfall for consumers? Yes, it is. Is it fair for manufacturers? No it's not.But this is exactly what it is happened The California Supreme Court recently ruled that automakers are not entitled to a trade-in value offset (or, of course, the car itself). One can only imagine the consequences if such a decision were to apply to other states, which might adopt a similar approach. What if an increasingly creative set of plaintiff's lawyers started telling customers to trade in or sell their cars as soon as they filed a lawsuit demanding a repurchase? Instead of a $40,000 car, they paid $60. He may have built a $10,000 recreational vehicle, resulting in a $1.5 million judgment ($600,000 plus $900,000 in civil penalties) in addition to attorney fees and court costs. And you can't even resell a very expensive product, or at least sell it during litigation to offset the value the consumer received. Therefore, it is important to evaluate early on whether the product should be repurchased, rather than waiting until litigation begins.
Managing costs through arbitration
Lemon law litigation can be an expensive and lengthy process. One way to control costs is to divert such claims to arbitration. In fact, many states require arbitration before consumers can sue, which is beneficial to manufacturers. Arbitration often allows manufacturers to move toward a simpler and more limited process, which can reduce defense costs and subsequent fee demands.
However, California's Song-Beverly law has no such requirement, and manufacturers typically must seek arbitration in court after a consumer files a lawsuit. However, recently, a California court has held that even when a manufacturer provides a warranty that includes an arbitration clause, it is generally not possible for a manufacturer to force arbitration because the sales contract between the consumer and the retailer/dealer is not signed. made it even more difficult. In fact, this very issue is currently before the California Supreme Court, which may rule that manufacturers cannot even enforce arbitration clauses in their warranties.
Repurchases and litigation: What manufacturers can do
In summary, lemon law lawsuits are on the rise in California and elsewhere, and state laws are increasingly focused on protecting consumers rather than manufacturers. Even before litigation, if a consumer requests a repurchase, the manufacturer must evaluate it fully and early enough to decide whether to repurchase or litigate (unless all claims reach the level of repurchase). However, some cases may actually require litigation). Even after a lawsuit has been filed, manufacturers can consider moving to arbitration instead if possible. And even if arbitration is not possible, we should continue to focus on expedited litigation to reduce the opportunity for consumers to sell or trade products. Otherwise, manufacturers could face judgments and penalties that far exceed the product's original value.
